TRANSFER TO UNBORN CHILD AND RULE AGAINST PERPETUITY

This article is written by Narayanareddy Sripriya of BMS College of Law, Bangalore, an intern under Legal Vidhiya

ABSTRACT:

This article includes the transfer of property to an unborn child and rule against perpetuity. Transfer of property to an unborn child, an interest is created for the benefit of a person not in existence at the date of the transfer, and it shall not take effect unless it extends to the whole of the remaining interest of the transferor in the property. The rule against perpetuity will limit the duration of future interest in the property, preventing from lasting it for an indefinite period.

INTRODUCTION:

The Transfer of Property Act came into existence in 1882 where before its existence the immovable properties were governed under the English law and the principle of equity. this act applies only to transfer by the act of the parties but not by operation of law. This act is applicable to both movable and immovable property and it deals with trans of property intervivos (between two living persons). According to section 5 of the Transfer of Property Act, the transfer of property is an act by which property is conveyed from a living person to another person or to himself either in the present or future. here the living person includes a company whether incorporated or not or an association or body of individuals.[1]

Essential elements for transfer of property:

• There must be an act performed which is not automatic but legally transferred to another person. This will not include will or inheritance as they are effective only after the death of the testator.
• Both the parties must be living and they can be a human being or a juristic person but they must be competent to transfer under the Indian Contract Act.
• The transferor must have the title with him to make a valid transfer. the title must be transferred from transferor to transferee.
• The transfer can be made in the present or in the future by making an agreement and also it can include conditional transfer.
• The property about to be transferred must be in existence and it can be movable, immovable or intangible, etc.
• The property can be transferred to any other person or to himself or to himself and any other person.

TRANSFER FOR BENEFIT OF UNBORN CHILD:

Section 13 of the Transfer of Property Act, is an exception rule to the above general rule regarding the transfer between living persons. In this section, a transfer can be made in favor of the unborn child and such benefit to an unborn child is valid subject to certain rules According to this section, an interest is created on the person who is not in existence at the time of transfer and this interest created will not take effect unless it extends to the remaining interest of the transferor in property.

The child in the womb in the section refers to the fetus in the uterus. An interest can be created in favor of a child in the womb by trust. And also section 20 says that an interest can be created in favor of a person not then living but acquired upon the birth where a vested interest is created, although he may not enjoy the property immediately after the birth.[2]

Essential conditions for section 13:

• Exception to intervivos rule: In general it says that the transfer can be made only between two or more living beings whereas, as an exception to that a  special rule is laid down stating transfer by a person to the child in the womb.
• Whether the transferee is or not in existence: According to the section transferee can be not in existence or in the womb at the time of transfer
• Unborn: Unborn includes the child in the womb and also the child not in the womb So prior and an absolute interest can be created even on a child in the womb or not
• Prior interest is condition precedent: A prior interest must be created on a person who is in existence at the time of transfer and the child must be born before the expiry of that person and no direct transfer can be made on the unborn child.
• An absolute interest on the property for the transferor must be transferred to the unborn child.

PARALLEL LAWS:

• Section 113 of the Indian Succession Act, 1925 corresponds to section 13 of the Transfer of Property Act where section 113 deals with the will and section 13 deals with private transfers other than the will. section 113 is useful to understand section 13 which states that a Bequest to a person not in existence at the testator’s death is subject to a prior bequest.
• Section 9 of the Indian Trusts Act,1882 provides that beneficiary under the trust created must be capable of holding the property and it excludes the person not in existence. So it means a person not in existence can neither be a transferee nor the beneficiary of the property. This is similar to section 5 of the Transfer of Property Act which deals with transfer between living persons.[3]
• Under Hindu Law transfer of property to the unborn child is void Since the Transfer of Property Act is applicable to Hindus the transfer can be made according to the conditions in favor of an unborn child. whereas this Act is not applicable to Mohammedan according to section 2 of the act which states that the rule must not affect the Mohammedan law.[4]
• The rights of the unborn child are recognized under various laws like in the Indian Penal Code where murder includes the unlawful killing of a fetus.

Section 20: When unborn acquires vested interest on Transfer for his benefit :

In a transfer of property, an interest therein is created upon a person who is not in existence and he acquires upon his birth, but he may not be able to enjoy thereof immediately upon his birth.

RULE AGAINST PERPETUITY:

Section 14 declares that all the transfers are inoperative and void, which will take effect after the death of one or more persons living at the date of such transfer or after the lifetime of the testator or provided that the ultimate transferee comes into existence on or before prior estate expires and he must be in the womb if not born and if he attains the age of majority the interest created is transferred.

Here perpetuity means continuous or unending transaction. perpetual transfer means the conveyance once made continues to regulate the fate of that property always and it continues. Owners of the property do not have the liberty to transfer that property in the course of succession. The interests created are for generations from generations. The law has always regarded the creation of perpetuity as against public policy and it is considered to be void and have no effect.[5]

Maximum remoteness of vesting = life of last preceding + minority of ultimate beneficiary (18 years)

Perpetuity arises in two cases :

• By taking away the power of alienation from the owner of the property which is an inseparable right on property
• By creating future remote interests

The former gives rise to section 10 which forbids restraint on alienation and the latter gives rise to a rule against perpetuities. The English rule against perpetuity is developed on the rule against restraints on alienation.      

Difference in the rule against perpetuity between Indian law and English law:

• According to Indian Law, the minority period is 18 years whereas it is 21 years under English Law
• In Indian law the gestation period must be the actual period whereas in  English law it is the gross period
• The absolute interest over the property must be transferred to the unborn child  according to Indian law but in English law, it need not be absolutely given
• According to Indian law, the unborn child must come into existence before the death of the last estate holder that is during his lifetime whereas he must come into existence within 21 years of the death of the last estate holder.

Exceptions to the Rule against Perpetuity:

• Transfer for the benefit of public : The rule against perpetuity is not applicable if the transfer of property is the advancement of the public like religion, education, health, commerce, etc. and it must be for mankind in general and not the specific individuals.
• Personal Agreement: This rule is applicable only when there is a transfer of interest if the agreement creates no interest over the property, then this rule is not applicable.it is not applicable to perpetual lease agreements.
• Covenants for pre-emption: In the case of Ram Baran Prasad V Ram Mohit Hazra ,Court held that the covenant of preemption is not hit by rule against perpetuity. A contract made after the transfer of property In respect of land is unrestricted in point of time and it does not create interest on land and it is binding on the parties ,legal heirs and successors . It is not against the rule against perpetuity.
• Covenant running with the land: It is free from perpetuity because the annexed land will be passed to the transferee in the same way as the title deeds are passed.
• Charge and rule against perpetuity :In charge there is transfer of interest of property from one person to another ,so it doesn’t effect the rule against perpetuity
• Mortgage and rule against perpetuity: The rule against perpetuity is not applicable in case of mortgage of property as there are no new interest created on any person and only right of redemption is applicable when the property to be redeemed.

Penalty for the rule against perpetuity:

If the transfer of property violates rule against perpetuity, then the interest created is void. And the property will be transferred back to the transferiror his legal heirs and any other interests created on the transferee is considered to be void.

CASE LAWS:

1. Girijesh Dutt v. Data Din, [6]In this case, A made a gift of her property to B (daughter of her nephew) and after her, to her male descendants (sons) if any, absolutely. In case, there was no male issue to B, then to B’s daughters without power of alienation. If there were no issues to B (male or female) then to C. B died issueless. The question was whether the gift to unborn daughters was valid? Whether a gift to B (her nephew) was valid? The Court held; that gift to unborn daughters failed under Section 13; (i) no prior estate and (ii) no absolute transfer; gift to C failed under Section 16.
2. Raja Bajrang Bahadur Singh v. Thakurain Baktaraj Kuer, the Supreme Court held that if there is an interest created on a group of persons or a class even though some of them are not in existence, it will be valid till the extent of persons in existence of that group at the time of testator’s death and is invalid to the rest[7]
3. Sopher v. Administrator General of Bengal[8]: A testator has directed that his property be divided among his living children after the death of his wife. The income must be divided and paid to all the children and to grandchildren till they attain the age of 18 years and then the absolute interest to be transferred to grandchildren but this bequest is considered void as it is against section 113 of the Indian Succession Act which corresponds to section 13 of Transfer of Property act.
4. In Ardeshir’s case,[9] a person made a settlement which include that 1/3 rd of the share of property to be transferred to his two sons and the remaining trust property to be divided among them after his death. The net income must be given to settler sons and to their sons after their death. if both sons died without male issue, then proper return back to settlor absolutely. Then settlor revoked and made some settlement on part of his benefit where it was held that the son’s son did not have any vested interest over the property since not born either on the settlement date or during the testator’s death and had no vested interest even to son’s son who was alive at that time.
5. The leading case is Cadell v. Palmer A trust was created for a term of 120 years, if 28 named persons or any of them should so long live and from the determination of that term for a further period of 21 years, and after the end of both terms, for the benefit of persons to be then ascertained. The House of Lords held that the transfer was valid in respect of the persons in being and 21 years thereafter.[10]
6. Shivji v. Ragunath, 1997, SC, only a contract for the sale of immovable property does not create any interest in immovable property. So the rule will not apply.
7. Venkata Shubanna v. D Chinna Panayya, 1989, AP. The husband executed a settlement deed for a lifetime to his wife and after her death to the unborn child. Valid transaction as it is a family agreement (no TP)

CONCLUSION :

In conclusion, the Transfer of property must be between two living parties whereas as an exception to it section 13 states that transfer can be made to the unborn child in which the prior interest must be created on one person and the absolute interest on the unborn child. The child must be born before the lifetime of the person on whose name prior interest is created or else the property will be transferred back to the settlor. Rule against perpetuity is based on equity and public policy and it helps the transferee in enjoying property and in alienation of the same. Even though this has criticisms it helps in the appropriate use of the property and protects the future generation rights or inheritors rights on the property.

REFERENCES:

1. Transfer of Property Act, section 5,no.4, acts of the Parliament,1882(India )
2. Transfer of Property Act, section 13,no.4, acts of the Parliament,1882(India )
3. DR. G.P. Tripathi ,Transfer of Property Act ,134 &135,Central Law Publications2020
4. Team attorney lex , https://teamattorneylex.in/2021/04/27/transfer-for-the-benefits-of-unborn-person/, 24th Nov 2023
5. Transfer of Property Act, section 14, no.4,acts of the Parliament,1882(India )
6. Girish dutt vs. Data Din , A.I.R. 1934 Oudh 35:147 i.c. 991
7. A.I.R. 1952 S.C. 7
8. AIR 1994 P.C.67
9. Ardeshir v. Duda Bhoy ,45 Bombay ,395
10. Cadell v. Palmer, (1833) 1 Cl& Fin 372; (b) Wilmer’s Trusts (in re:), (1903) 2 Ch 411.

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[1] Transfer of property act ,section 5 ,no.4 ,acts of the parliament,1882(India )

[2] Transfer of property act ,section 13 ,no.4 ,acts of the parliament,1882(India )

[3] DR.G.P.Tripathi ,Transfer of Property Act ,134 &135,Central Law Publications2020

[4] Teamattorney lex , https://teamattorneylex.in/2021/04/27/transfer-for-the-benefits-of-unborn-person/, 24^th nov 2023

[5] Transfer of property act ,section 14 ,no.4 ,acts of the parliament,1882(India )

[6] Girish dutt vs. Data Din , A.I.R. 1934 Oudh 35:147 i.c. 991

[7] A.I.R. 1952 S.C. 7

[8] AIR 1994 P.C.67

[9] Ardeshir v. Duda Bhoy ,45 Bombay ,395

[10] Cadell v. Palmer, (1833) 1 Cl&Fin 372; (b) Wilmer’s Trusts (in re:), (1903) 2 Ch 411.

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